What is a Contractor Mortgage, and who are they for?

A contractor mortgage is a mortgage provided by a specialist financial institution (rather than a traditional High Street lender) for the following types of contract worker:

  • Agency workers – with at least 1 year of working history
  • Contractors/employees of ‘umbrella companies’
  • Employed fixed/short term contractors
  • Self-employed contractors – with 6 months (or more) working history

High street lenders tend to view contractors/freelances/self employed workers as a risk for standard mortgages, not because of earnings but because they don’t understand the contractor working environment.

High street lenders struggle to interpret different contracts and working arrangements, thus tend to refuse to lend to contractors – which is why it’s better to look for a contractor mortgage through a Contractor Mortgage Specialist or a contractor mortgage broker.

Every lender will have a different policy for contractor mortgages, depending on many factors such as:-

  • length of time served as a contractor
  • contractor day rate
  • length of guaranteed contract work remaining
  • deposit available
  • length of repayment time of mortgage

Therefore, it is better to approach a Contractor Mortgage Specialist who has experience of the contractor mortgage market, preferential relationships with lenders and a wider range of products available.

How to help improve your chances of getting a contractor mortgage

Establish what type of contractor you are

  • Self-employed, with a lengthy working history
  • Employees on contracts via an umbrella company or agency
  • Professional contractors (e.g. accountant, solicitors, healthcare professional, IT engineers etc.)

Prepare your documentation

  • Trading history, with audited accounts
  • Invoices/timesheets
  • Contract (present and future)
  • Financial projections of earnings
  • Personal Identification (passport, driving licence etc.)
  • Credit history/credit score (ensure no defaults, repayment history is in good standing, no County Court Judgements etc.)
  • Company incorporation documents (where applicable)
  • Taxation information (e.g. registration of self-employment)
  • Ensure you are on the Electoral Roll at your present address

Research the market

  • Draft an enquiry form/application for a specific property – so all quotes returned to you can be compared ‘like for like’ (e.g. purchase price, repayment period, deposit amount etc.)
  • Speak to several different Contractor Mortgage Specialists to obtain quotes
  • Once quotes are received, enquire with Contractor Mortgage Specialists how deal can be improved (e.g. increase deposit, payment holidays/breaks, repayment period, additional documentation etc.)
  • Compare each Contractor Mortgage Specialist’s quote against the others, ask if they offer ‘price matching’. It may be that the same lender has been approached for two quotes, but one Contractor Mortage Specialist is charging higher fees/commission

Clearly Contractor mortgages are available, and you can easily increase your chances of approval with a little preparation and by following the above three steps.

Timing is the final factor; documentation and your contract situation (day rate, length of contract remaining and trading history) can all have significant effects on your contractor mortgage application so ensure you apply at the optimum time for the best results.

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